Interim report 2018/2019 1 May 2018-31 July 2018 THE URGE TO EXPLORE SPACE
egetæpper a/s Industrivej Nord 25, 7400 Herning Tel. no.: +45 97 11 88 11 Fax no.: +45 97 11 95 80 www.egecarpets.com e-mail: ege@ege.dk Registration No. CVR-no.: 38 45 42 18 Board of Directors Ebbe Malte Iversen, director (chairman) Hans Olesen Damgaard, director (deputy chairman) Kaja Møller, director Anne Mette Zachariassen, self-employed consultant Jørgen Stender Clausen, smith (staff representative) Maja Lorenzen, office clerk (staff representative) Management Svend Aage Færch Nielsen, CEO John Vestergaard, CFO Auditors Ernst & Young Morten Friis, state authorised public accountant Karsten Mehlsen, state authorised public accountant Solicitors DAHL, Herning Bankers Danske Bank Handelsbanken
Contents Management statement... 2 Management report... 4 Financial highlights for the ege Group... 5 Accounting policy... 11 Income statement 1 May 2018 31 July 2018... 12 Consolidated income statement 1 May 2018 31 July 2018... 15 Balance sheet at 31 July 2018... 16 Cash flow statement 1 May 2018 31 July 2018... 18 Statement of change in equity... 21 Notes... 22 Contacts: Mr. Svend Aage Færch Nielsen, CEO Tel: +45 97118811 Mr. John Vestergaard, CFO Tel: +45 97118811 egetæpper a/s Herning, 31 August 2018 1
Management statement The management and the Board of Directors of egetæpper a/s have today presented and approved the interim report for the period 1 May 2018-31 July 2018. The interim report, which has not been audited or reviewed by the company auditors, has been prepared in accordance with IAS 34 Presentation of interim financial reports as approved by EU as well as additional Danish disclosure requirements for listed companies. In our opinion the interim report gives a true and fair view of the Group s assets, liabilities and financial state as per 31 July 2018 as well as of the result of the Group s activities and cash flows for the period 1 May 2018-31 July 2018. Moreover, we find that the management report gives a true statement of the development of the Group s activities and financial state, of the profit for the period and of the Group s financial state as a whole, as well as a description of the major risks and elements of uncertainties the Group is facing. Herning, 31 August 2018 Management: John Vestergaard CFO Svend Aage Færch Nielsen CEO Board of directors: Ebbe Malte Iversen Hans Olesen Damgaard Kaja Møller Chairman Deputy chairman Anne Mette Zachariassen Jørgen Stender Clausen Maja Lorenzen Staff representative Staff representative 2 MANAGEMENT STATEMENT
EGE VOGUE LIKE A PAINTING DENMARK 3
Management report Q1 in figures (Group level) Turnover EBIT DKK million 198 234 222 284 274 DKK million 43 24 22 24 12 2014/15 2015/16 2016/17 2017/18 2018/19 2014/15 2015/16 2016/17 2017/18 2018/19 Turnover of Q1 2018/19 has decreased 3% compared to last year which as expected is primarily due to Carpet Concept. EBIT-margin % 18.4 12.3 9.9 8.6 4.3 2014/15 2015/16 2016/17 2017/18 2018/19 The EBIT margin makes up 4.3% and is lower than our overall expectations for the financial year and slightly below our expectations for Q1. EBIT makes up DKK 11.9m which is a 50% decrease compared to last year. The result is slightly below our expectations and can be attributed to two significant events: 1. Completion of international sales conference During Q1, an international sales conference in ege was held with 250 participants from 57 countries, and in this context a number of new collections and concepts have been introduced which will make the sales and production process more efficient. These initiatives affect Q1 cost-wise with DKK 5m. 2. Decline in revenue in Carpet Concept The commercial market in Germany for high-end products has been unstable for a period, resulting in a lower level of activity and revenue. We expect that the substantial effort we have made over the last 12 months in order to improve the competitiveness of Carpet Concept with new products and collections will result in a positive effect during the coming quarters. The impact of earnings for Q1 makes up DKK -5.7m. ROIC (after taxes) % 27.5 16.4 11.8 11.0 4.4 2014/15 2015/16 2016/17 2017/18 2018/19 Return on investec capital makes up 4.4%. The financial year 2015/16 is affected by profit from the sale of our property in Vejle (before taxation DKK 20m after taxation DKK 20m). 4 MANAGEMENT REPORT
Financial highlights of the group DKK million 3 months 3 months Year 2018/19 2017/18 2017/18 Turnover 274 284 1,157 Result before financial entries and taxation (EBIT) 12 24 79 Financial entries (net) -4-5 -17 Result before taxation 8 19 62 Group net result 6 14 44 Total assets at end of period 1,008 1,009 1,019 Capital 26 26 26 Capital and reserves at end of period excl. of minority holdings 512 495 506 Net working capital 254 241 285 Cash flows from operating activity 52 29 60 Number of employees 728 700 707 Investments in long-term assets (excl. of acquisition of factory) 19 14 49 Investments by acquisition of subsidiary 0 0 174 Depreciations 11 11 43 Net profit ratio (EBIT-margin) 4 9 7 Return on invested capital (RoIC) 4 11 7 Profit on equity after taxation (p.a.) 4 11 9 Solvency ratio 51 49 50 Net working capital in percentage of turnover 23 21 25 Share capital, nominal DKKt 26,210 26,210 26,210 Number of A-shares 330,340 330,340 330,340 Number of B-shares (in circulation) 2,290,720 2,290,720 2,290,720 Recommended dividend per share, DKK - - 6.50 Net asset value of share, DKK 195.19 188.79 193.07 Stock exchange price 234 280.00 250.00 Stock exchange price/net asset value 1.20 1.48 1.29 FINANCIAL HIGHLIGHTS FOR THE GROUP 5
Turnover divided per brand ege Group is characterised by a high degree of integration and internal trade between the brands. Turnover and EBIT are reported per brand to give a clear picture and ensure transparency and insight into the value creation in the Group. Turnover divided per brand DKK million 2017/18 2018/19 284.2 273.7 210.7 211.0 34.1 30.7 46.9 37.2 25.9 26.0 33.4 31.2 ege Bentzon Carpets Carpet Concept Hammer Carpets Interal trade ege Group EBIT divided per brand DKK million 2017/18 2018/19 24.3 15.2 11.7 6.9 6.4 5.8 4.0 0.8 1.7 1.7 2.1 1.0 ege Bentzon Carpets Carpet Concept Hammer Carpets Intra-group/ ege Group Group depreciations Internal trade and sourcing of products in the Group entail internal profit etc. These are eliminated at Group level. Eliminations constitute overall approx. 1.0 DKKm in Q1 and primarily consist of depreciations at Group level on intangible assets (customer relations Hammer Carpets and Carpet Concept). 6 MANAGEMEN REPORT
Accounting report Group EBIT of the quarter EBIT constitutes DKK 11.9m against DKK 24.3m last year. Turnover The Group turnover amounts to DKK 273.7m against DKK 284.2m last year, representing a decrease of 3%. The development is mainly attributable to Carpet Concept and is as expected. Equity The equity of the Group excl. of minority holdings amounts to DKK 511.6m against DKK 494.8m last year. The solvency ratio constitutes 51% against 49% last year. Costs Other external costs amount to DKK 52.8m and have increased by DKK 3.4m compared to last year. Staff charges amount to DKK 78.9m against DKK 75.4m last year. Overall, the increase in costs amount to DKK 6.9m corresponding to 6%. Depreciations amount to DKK 11.2m against DKK 11.1m last year. Cash flow statement Cash flows from operation amount to DKK 51.8m against DKK 29.0m last year. Cash flows for investments amount to DKK 23.3m against DKK 14.3m last year. Financial entries Financial entries amount to DKK -3.8m against DKK -5.5m last year. 7
The past quarter ege Turnover of the quarter amounts to DKK 211.0m, which meets our expectations (last year s growth in Q1 was extraordinarily high and amounted to 15%. Overall, Scandinavia has not met our expectations. We have experienced a decline in Denmark whereas Sweden is above the level of last year. Our core growth markets in the UK, France and DACH (Germany, Austria and Switzerland) have lived up to expectations. Amongst our minor export markets it is in particular Benelux, USA and Spain who perform satisfactorily. EBIT makes up DKK 6.9m and is reduced by DKK 8.3m compared to last year. The development is by and large as expected as an international sales conference was held in the quarter with approx. 250 participants from 57 different countries. On this occasion a new Highline concept was introduced, which has led to increased costs for sample- and marketing materials. Developments in the exchange rate for SEK have influenced EBIT negatively by DKK 1.5m. Revenue of the quarter is slightly below our expectations. Carpet Concept As expected Carpet Concept has experienced a decline in turnover of 21% of the quarter. As mentioned earlier the commercial market for high-end products in Germany has been unstable for a period, resulting in a lower level of activity and revenue. We expect that the substantial effort we have made over the last 12 months in order to improve the competitiveness of Carpet Concept with new products and collections will result in a positive effect during the coming quarters. Revenue of the quarter is slightly below our expectations. Turnover DKK million. EBIT 210.7 211.0 46.9 37.2 15.2 6.9 4.0 1.7 2017/18 2018/19 2017/18 2018/19 8 MANAGEMENT REPORT
Hammer Carpets The revenue of Hammer Carpets is at level with last year, which does not quite live up to our expectations. The development is primarily due to postponement of deliveries to the following quarters. Corresponding to our expectations EBIT has more than doubled compared to last year. The primary reasons for this are optimization and efficiency of production and procurement. Bentzon Carpets Bentzon Carpets has experienced a decline in revenue of approx. 10% compared to last year. The decline is attributable to Group internal sales to ege and Carpet Concept, as revenue for external customers has increased by 16% compared to last year. Our expectations for the revenue are fulfilled. 34.1 30.7 25.9 26.0 0.8 1.7 6.4 5.8 2017/18 2018/19 2017/18 2018/19 9
10 INTERCONTINENTAL LONDON THE O2 ENGLAND HAMMER CARPETS
Prospects for the financial year 2018/19 Based on the development we have seen during the first three months of the financial year the prospects for the financial year 2018/19, as announced in the financial statement as of 29 June 2018, are maintained. Overall expectations for 2018/19 are as follows: Expected Realised Realised 2018/19 3 month 3 month 2018/19 2017/18 Turnover DKKm 1,225 274 284 EBIT-margin 7.5% 4.3% 8.6% Cash flows from operating activity DKKm 90-100 52 29 Investments DKKm 100 19 14 Accounting policies The interim report is presented in accordance with IAS 34 Interim Financial Reporting as approved by the EU and additional Danish disclosure requirements for interim reports for listed companies. With effect from 1 May 2018, egetæpper has implemented IFRS 9 and IFRS 15. Implementation of IFRS 9 has only resulted in changes in the calculation of expected losses on debtors with provisions for losses on debtors increased by DKK 0.9m by posting directly to equity 1 May 2018 without adapting comparison numbers. Implementation of IFRS 15 has not resulted in changes in recognition and measurement of revenue as revenue is factored in to determine the point in time at which a customer obtains control of a promised asset. Apart from the above, accounting policies are unchanged in relation to the annual report 2017/18. 11
Income statement 1 May - 31 July Note t.dkk 2018 2017 Turnover 273,739 284,202 Change in stock of finished goods, work in progress and commercial goods 2,216 3,734 Costs for raw materials, auxiliaries and commercial goods -121,547-128,302 Other external costs -52,850-49,396 Gross profit 101,558 110,238 Other operating income 472 617 Staff costs -78,880-75,389 Depreciations -11,225-11,098 Other operating costs -12-20 Profit before financial entries and taxation 11,913 24,348 Profit after tax in joint venture 36 292 Financial income 42 23 1 Financial expenses -3,806-5,514 Profit before tax 8,185 19,149 Tax on profit for the period -2,406-5,446 Profit for the period 5,779 13,703 Divided between: Shareholders of egetæpper a/s 5,334 13,115 Minority shareholders 445 588 5,779 13,703 Earnings per diluted share, DKK (EPS-D) 2.04 5.00 Earnings per share, DKK (EPS) 2.04 5.00 12 PROFIT AND LOSS ACCOUNT
EGE WUJIANG BOZHONG CHINA 13
14 STADHUIS ROTTERDAM HOLLAND EGE
Consolidated income statement 1 May - 31 July t.dkk 2018 2017 Financial entries which might be reclassified to the profit and loss account Exchange rate adjustment of foreign subsidiaries 215-719 Tax on other comprehensive income 0 0 Other comprehensive income after tax 215-719 Profit for the period 5.779 13.703 Total recognised comprehensive income 5.994 12.984 Divided between: Shareholders of egetæpper a/s 5.549 12.396 Minority shareholders 445 588 5.994 12.984 CONSOLIDATED INCOME STATEMENT 15
Balance sheet Note t.dkk. 31/7 31/7 30/4 2018 2017 2018 Assets Long-term assets Intangible assets Completed development costs 335 819 698 Customer relations 9,409 11,980 10,198 Agency rights 1,610 1,610 1,610 Goodwill 148,252 148,087 148,252 Intangible projects under construction 31,817 14,532 27,843 Total intangible assets 191,423 177,028 188,601 Tangible fixed assets Land and buildings 163,554 164,560 165,342 Plant and machinery 138,277 139,730 143,971 Fixtures and fittings, tools and equipment 23,413 24,624 25,581 Property plant and equipment under construction 39,482 18,320 20,570 364,726 347,234 355,464 Financial fixed assets Capital investments in joint venture 23,199 26,473 23,162 23,199 26,473 23,162 Total long-term assets 579,348 550,735 567,227 Short-term assets Inventories 265,071 268,637 269,285 Trade receivables 133,463 140,617 168,109 Cash at bank and in hand 30,257 49,178 13,973 Total short-term assets 428,791 458,432 451,367 Total assets 1,008,139 1,009,167 1,018,594 16 BALANCE SHEET
Note t.dkk 31/7 31/7 30/4 2018 2017 2018 Equity and liabilities Equity Share capital 26,210 26,210 26,210 Reserve for exchange rate adjustments -1,771-879 -1,986 Retained earnings 470,128 452,467 464,794 Proposed dividends 17,037 17,037 17,037 511,604 494,835 506,055 Minority shareholders part 4,133 4,272 5,242 Total equity 515,737 499,107 511,297 Liabilities Long-term liabilities Deferred tax 30,379 30,385 30,381 Credit institutions 50,007 69,925 55,017 2 Engagement relating to acquisition of minority shareholding 54,103 54,507 54,189 134,489 154,817 139,587 Short-term liabilities Trade payables 41,363 58,618 55,863 Debts to joint venture 5,412 4,992 6,772 Debts to associates 28,068 0 25,000 Credit institutions 83,196 93,151 93,453 2 Engagement relating to acquisition of minority shareholding 89,930 83,467 87,089 Corporation tax 12,676 9,899 9,666 Other payables 97,268 105,116 89,867 357,913 355,243 367,710 Total liabilities 492,402 510,060 507,297 Total equity and liabilities 1,008,139 1,009,167 1,018,594 17
Cash flow statement 1 May - 31 July t.dkk 2018 2017 Turnover and other operating income 274,426 284,100 Operating costs -262,298-260,471 Depreciations 11,225 11,098 Change in working capital 28,847 977 Cash flow from activities before financial items 52,200 35,704 Interest receipts or similar 42 595 Interest payments or similar -1,064-1,882 Cash flow from ordinary operation before taxation 51,178 34,417 Corporation tax paid 602-5,457 Cash flows from operating activity 51,780 28,960 Acquisition of intangible assets -19,336-11,015 Acquisition of tangible assets 0 291 Sale of tangible assets -3,974-3,573 Cash flows to investment activity -23,310-14,297 Borrowing 3,000 0 Instalments -4,942-5,022 Change in operating credits -10,257 6,809 Cash flows from financing activities -12,199 1,787 Cash flow of the period 16,271 16,450 Cash equivalents at beginning of period 13,973 33,300 Value adjustment of cash equivalents 13-572 Cash equivalents at end of period 30,257 49,178 18 CASH FLOW STATEMENT
BENTZON CARPETS RAWLINE SCALA (FLATWOVEN PRODUCT FROM BENTZON CARPETS, MILLITRON DYED) 19
20 ONETESA GERMANY CARPET CONCEPT
Statement of changes in equity at 31 July 2018 t.dkk Share Reserve for Retained Proposed Total Minority Total capital exchange earnings dividends share- equity rate holders adjustment Equity 1 May 2017 26,210-160 439,352 17,037 482,439 5,349 487,788 Profit for the period 0 0 13.115 0 13.115 588 13.703 Exchange rate adjustments 0-719 0 0-719 0-719 Dividend paid 0 0 0 0 0-1,665-1,665 Total equity 31 July 2017 26,210-879 452.467 17.037 494.835 4.272 499.107 Equity 1 August 2017 26,210-879 452.467 17.037 494.835 4.272 499.107 Profit for the period 0 0 12.327 17.037 29.364 970 30.334 Exchange rate adjustments 0-1,107 0 0-1,107 0-1,107 Dividend paid 0 0 0-17,037-17,037 0-17,037 Total equity 30 April 2018 26,210-1,986 464,794 17,037 506,055 5,242 511,297 Equity 1 May 2018 26,210-1,986 464,794 17,037 506,055 5,242 511,297 Profit for the period 0 0 5,334 0 5,334 445 5,779 Exchange rate adjustments 0 215 0 0 215 0 215 Dividend paid 0 0 0 0 0-1,554-1,554 Total equity 31 July 2018 26,210-1,771 470,128 17,037 511,604 4,133 515,737 STATEMENT OF CHANGES IN EQUITY 21
Notes Notes t.dkk 2018 2017 1 Financial costs Other interest expenses 772 663 Exchange rate adjustments 279 1,219 Value adjustment on liability commitment on purchase of minority entry 2,755 3,632 3,806 5,514 31/7 31/7 30/4 2018 2017 2018 2 Liability commitment relating to acquisition of minority shareholding Noncurrent At the beginning of the period 54,189 53,622 53,622 Regulation on deposit accounts 0 0 288 Regulation of the year -86 885 279 54,103 54,507 54,189 Current At the beginning of the period 87,089 80,720 80,720 Dividend paid 0 0-6,811 Regulation of the year 2,841 2,747 13,180 89,930 83,467 87,089 Long-term liabilities incorporate the value of put option on purchase of the remaining 25% of Carpet Concept. According to the contract the remaining shares of Carpet Concept will be taken over at the earliest 1 December 2021. The shares are taken over at an agreed price of DKK 58.0m (EUR 7.8m). The debt is increased/reduced yearly by the minority s share of dividend payments. Short-term liabilities incorporate the value of put option on purchase of the remaining 49% of Bentzon Carpets ApS and Hammer Carpets A/S. According to the contracts the remaining shares of Bentzon Carpets ApS will be taken over no later than 1 May 2021 and Hammer Carpets A/S no later than 1 October 2021. According to the contracts minorities can require redemption earlier if desired. With regard to both contracts the shares are taken over at net asset value. The debt is increased/reduced yearly by a share of the year result and will be reduced by a share of the dividend distribution. 22 NOTES
Notes without references As per 1 May 2018 we have established a new Group structure with 4 equal brands (areas of business) and a number of Group functions. Based on this situation the segment reporting will be adjusted to reflect the established brand structure. The segmentation is prepared on the basis of the Group s internal managment reporting and is based on the individual brand (operating segment). Consolidation to reportable segments is based on differences in customers and influents. EBIT is used as segment result. Carpet Hammer Bentzon Total reportable 2018/19 ege Concept Carpets Carpets segments Revenue external customers 198,735 37,217 24,742 13,853 274,547 Internal revenue between segments 12,302 0 1,235 16,871 30,408 Total segment revenue 211,037 37,217 25,977 30,724 304,955 Profit from sale of assets 0 0 0 0 0 Depreciations 7,691 847 1,133 571 10,242 Segment profit before tax (EBIT) 6,870-1,676 1,683 5,774 12,651 Segment assets 683,784 104,261 129,895 84,535 1,002,475 Carpet Hammer Bentzon Total reportable 2017/18 ege Concept Carpets Carpets segments Revenue external customers 200,046 46,919 23,976 11,673 282,614 Internal revenue between segments 10,699 0 1,901 22,418 35,018 Total segment revenue 210,745 46,919 25,877 34,091 317,632 Profit from sale of assets 291 0 250 0 541 Depreciations 7,934 867 676 557 10,034 Segment profit before tax (EBIT) 15,196 3,989 826 6,401 26,412 Segment assets 672,154 114,356 122,619 87,606 996,735 NOTES WITHOUT REFERENCES 23
Notes without references Reconciliation of result for the period before tax 2018/19 2017/18 Segmental result for reportable segments 12,651 26,412 Unallocated depreciations -983-1,064 Unallocated financial costs -3,764-5,491 Unallocated profit from sale of assets 0 0 Group elimination 281-708 Result for the period, cf. Income Statement 8,185 19,149 Reconciliation of assets 2018/19 2017/18 Assets for reportable segments 1,002,475 996,735 Unallocated stock -15,949-13,468 Unallocated cash equivalents 0 0 Unallocated fixed assets 21,913 25,900 Assets, cf. Balance sheet 1,008,439 1,009,167 Segment information - geographically Carpet Hammer Bentzon Total reportable 2018/19 ege Concept Carpets Carpets segments Growth markets (UK-FR-DACH) 55,985 28,324 8,942 5,728 98,979 Other primary markets (DK-NO-SE) 73,276 4,437 3,666 2,941 84,320 Other markets 68,666 4,456 12,134 5,184 90,440 Total 197,927 37,217 27,742 13,853 273,739 Revenue is factored in at a specific time corresponding to customers gain of control. There is only one product (carpets) Carpet Hammer Bentzon Total reportable 2017/18 ege Concept Carpets Carpets segments Growth markets (UK-FR-DACH) 52,811 40,484 14,435 5,612 113,342 Other primary markets (DK-NO-SE) 75,644 3,393 5,362 1,012 85,411 Other markets 73,179 3,042 4,179 5,049 85,449 Total 201,634 46,919 23,976 11,673 284,202 24 NOTES WITHOUT REFERENCES
THE URGE TO EXPLORE SPACE egecarpets.com